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Mainland investment transforms Kenya's retail and real estate sector

Mainland investors have played a key role in opening up new retail and logistics opportunities along the Thika super highway, one of Kenya's most important commercial routes, with China's automotive exports also clearly benefitting.

Photo: Mainland investment is expanding Kenya’s retail base.
Mainland investment is expanding Kenya's retail base.

Mainland investment and know-how is playing a key role in opening up Kenya – one of Africa's most vibrant economies – as an important consumer market for exporters. One of the key signs of this has been China's involvement with a number of the country's most high-profile infrastructure projects, as well as its success in automotive exports.

Earlier this month, Foton, a Beijing-based truck and bus manufacturer, secured a deal to supply the Nairobi County government with 2,000 vehicles over the next three years. The move is set to see Foton buses and trucks dominate Kenyan highways, with their success said to be down to their robust construction and competitive pricing.

According to government sources, Foton saw off GM, Toyota, Isuzu, Leyland and Mercedes to win the contract, despite all of the competing businesses being more established in the Kenyan market. Following the signing of the deal, the first 200 vehicles are expected to be delivered within a year, with production being handled via the company's US$50 million assembly plant in Nairobi.

Fittingly, the key artery that many of these vehicles are destined for is also of Chinese manufacture. The 50km Thika Super Highway, one of Kenya's most important commercial routes, was built by three Chinese construction firms – China Wu Yi, Sinohydro Corporation and Sheng Li Engineering – at an estimated cost of US$360 million.

Completed just two years ago, the highway has already had a transformational effect on the local economy. This has seen a huge amount of investment attracted to those areas serviced by this eight-lane showpiece route.

Photo: The Thika Road: Kenya’s key commercial artery.
The Thika Road: Kenya's key commercial artery.

Prior to work commencing on the route in 2010, an acre of land along the 56km stretch was valued at around Kes150,000 (approximately $17,500). Today, that same land is commanding prices in excess of Kes2 million ($250,000), with its value set to rise still higher as investors jockey to secure prime locations.

Overall, property developers have benefitted from the consequent urban-rural migration, with a number of people selling their property in Nairobi and looking to relocate to the more outlying areas served by the highway. Explaining its impact, David Gatimu, Nairobi's Deputy Planning Director, said: "The highway has helped decongest Nairobi. The city has long suffered from over-crowding and its high urban population level has strained its overall resources."

The improved infrastructure, according to Gatimu, has both curtailed spiraling property prices in Nairobi, the country's capital, and re-balanced property prices along the route of the highway. The concurrent shift in residential patterns has also spurred the construction of new out-of-town retail outlets. Among the landmark projects under construction, as a result, is the multimillion dollar Garden City, a mega-shopping mall set next to the East African brewery site in Ruaraka, a Nairobi suburb.

Photo: The Thika Road Mall.
The Thika Road Mall.

The development has been jointly funded by the CDC Group Plc of London (US$25 million) and the World Bank (US$7 million). Its backers are currently pitching it as "the most innovative shopping mall of its kind in East Africa".

This new development will line up alongside a number of other retail centres that have already opened along the new route. Chief among these is the Thika Shopping Mall, home to a range of branded retail chains, cafeterias and banks. It is soon to be joined by the Uni-City Shopping Mall, a commercial venture by the nearby Kenyatta University.

The route has also triggered investment in other areas aside from real estate. A number of food haulage companies, for instance, have upgraded their transportation fleet in order to fully take advantage of the improved access to many of the country's key retail/distribution centres. It has also proved a logistical boost for exports of tea and coffee, two of the country's key agricultural assets.

John Kariuki, Special Correspondent, Nairobi

Content provided by Picture: HKTDC Research
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